A couple of weeks ago the news came out that directory business Yellow Pages Group was being taken off the sales block.
The marketers of the business pointed to the current economic climate in justifying the decision to can the sales process, while others identified bank pressure as the key motivator. However at a digital level, I reckon the business has experienced killer jabs from consumers and Google that it has failed to recover from.
Back in March 2007 Yellow Pages Group was sold by Telecom to a joint private capital and pension consortium for $2.2 billion, in what was the largest ever local leveraged buyout. Even in the heady pre-global financial crisis times, it was a sobering amount of money.
Clearly the buyers were factoring in significant growth to justify the price, but this failed to eventuate. In the sales collateral circulated by the sales agent earlier this year reported annual revenue was quoted as being $297 million, while “pro forma” EBITDA was $166m.
Word on the streets was that the owners were seeking offers in the $600m to $900m range. The fact that this sum would only go about halfway to meeting the $1.7 billion owed to more than 20 banks and lenders, speaks volumes about the pressure the owners felt to sell.
The information memorandum circulated by the sales agents identified two main business segments, the directory business and the 018 assistance business, with the former making up the vast majority of income.
A directory business makes money in two core ways. First it seeks to upsell listers into larger listings with bells and whistles.
In the media game this is known as “lipstick” as it portrays the person or business in more glamorous light.
A second source of income is the display advertising it can bundle up with the actual listings, in the same way newspaper websites run advertisements around news copy.
While arguments can be made about whether or not Yellow Pages did a good job of selling lipstick and display, I would argue a core reason for its downfall in the online space is that it forgot about consumers.
It figured brand alone would result in it owning online directories, to the point of forgetting that one needs to earn the right to offer services to consumers.
Street wisdom is that a punter will suffer a poor user experience two or three times on a website before they simply give up and go somewhere else. This is what I figure happened to most users of Yellow Group’s two flagship websites.
If you have ever gone to http://www.yellow.co.nz or http://www.whitepages.co.nz then a few things become apparent.
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Firstly, the search engine is dreadful. There seems to be no fathomable rhyme or reason to the results you will get. Rather than using smart algorithms to work out what a person is likely to be looking for, they seem tightly targeted on verbatim search terms. So if you search for “David Smith, Christchurch”, it won’t return listings for D Smith.
The frustration experienced when you search for a person whom you know is there but stays hidden courtesy of a dumb search engine can push normally sane people right to the edge.
Secondly, the default search order for businesses is nominally based around those businesses it holds the most information about. Not only is this not intuitive for users, it looks suspiciously like advertising spend determines placement. Not a great way to build trust.
And thirdly, the search cards for businesses don’t actually list the phone numbers, you need to click off to another page. Damn frustrating.
A usability expert could have a field day on these webpages. Sadly it will be too late if many online consumers have already given up on the two directory sites.
Meanwhile Google got a lot better. And I mean a lot better. Not only did it launch Google Directory and Google Streetview, but its content indexing got a truckload better for phone numbers. It’s fast and mobile friendly. Plus it does a pretty mean reverse phone number search.
Then last year Google introduced multi packs of local business listings, based on geolocation.This is where it displays contact details for likely businesses along with a source map, after working out where you are. So if you search “pizza” and are in Christchurch, you get seven local pizzarias offered up. Last year searchengineland.com found that the organic referral visits of many big business directory sites’, including Yellow’s US equivalents http://www.yellowpages.com, http://www.whitepages.com and www. superpages.com, dropped in the wake of this change.
Yellow Group had a huge headstart with its online directory business, with trusted brands that went back generations. The business was its to lose and a combination of lousy usability and the Google monster may have seen that come to pass.
The sobering news is that the same thing could happen to your business. There are a swag of companies looking decidedly unsustainable in the face of Google’s profound ability to examine, index and retrieve information.
If you rely on ownership of data, obscurity of information or a tilted playing field, then Google will likely challenge your long-term sustainability. The weaknesses I perceive in Yellow Group’s flagship websites is a salient reminder to any business owner to ask how Google-proof they are.
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